Released: 28 May 2020
May Data Shows World Economy Mired In Recession
The fall in economic growth is likely to worsen in Q2
The main contributors to global growth in recent years have been China, USA, and India, together accounting for over 60% of all economic expansion. The World Economics Global Growth Index, based on survey data derived from sales managers, shows that sales levels in all three countries have fallen steeply for successive months. Reflecting the harsh reality of sales cratering in most industries, and down to zero in many, unemployment levels have risen to depths unimaginable just 3 months ago. As a consequence, the world economy is in deep recession, howsoever defined.
GLOBAL: HEADLINE SALES MANAGERS INDEX (SMI)
China - by far the world’s biggest economic growth engine in recent years - is now experiencing a fifth month of falling economic activity.
China has accounted for approximately 35% of global growth over the past 3 years. January to April Sales Managers Survey data for China has reflected a major shrinkage in economic activity (since confirmed by other data). May has seen something of a bounce back in some sectors , with many people back at work, and many manufacturing and service industries consequently able to produce near their pre-Covid peak, but the headline Sales Managers Index remains below the crucial 50 level signalling continuing recession.
The problem now is that many non-domestic customers of China's companies are still in lockdown and unable or unwilling to buy Chinese goods and services. China was the first country to lockdown its economy, and economic activity remains at much lower levels than seen in 2019, but it is likely that China will emerge earlier from recession than either the US or India.
USA, the second biggest contributor to global growth, is also experiencing falling levels of economic activity.
The USA has accounted for just under 18% of global growth in recent years, but the latest Sales Managers Index numbers suggest the economy shrank dramatically for the fourth successive month in May. The Headline Sales Managers Index and sub-indexes covering Market Growth, Profits, and Business Confidence are all at all-time lows.
Given the late shutdown of its economy and consequent continuing impact of the coronavirus, economic activity in the USA is unlikely to recover in June, and full recovery is unlikely in Q3.
India, the third largest contributor to global growth, is the worst affected of the three countries.
India has been the third major engine of global growth for over a decade, accounting for almost 9% in recent years. India's rapid growth has slowed dramatically in recent months. The Governments late reaction to the Coronavirus has accelerated the fall. In May Sales Managers reported catastrophically low levels of activity. The Job Index in particular reflects massive unemployment following Prime Minister Modi's 4-hour notice of the total lockdown of the Indian economy two months ago as shown by the Sales Managers Index.
India has experienced falling demand levels for just two months, compared with the longer-term falls in China and the USA, as the economy was shut down much later. But the falls in demand shown by the Sales Managers Index in April and particularly May have been far steeper, with the Jobs Index registering an unheard of 27.6 point fall to an Index level of just 19.3.
► ALL SALES MANAGERS INDEX DATA IS AVAILABLE ON SUBSCRIPTION